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The government has released its terms of reference for a review of the Dairy Industry Restructuring Act.

The DIRA was established in 2001 to authorise a restructuring of the dairy industry, which was in the process of undergoing significant structural changes aimed at transforming and improving its performance.

At the time, the New Zealand Dairy Board and New Zealand's two largest dairy-processing cooperatives (New Zealand Dairy Group and Kiwi Co-operative Dairies) were looking to merge into a single, vertically integrated company, Fonterra. The aim was for Fonterra to drive the dairy processing sector towards the higher end of the dairy value chain and allow for greater collection, processing and marketing economies.

The government approved this merger, despite risks highlighted by the Commerce Commission around its potential to reduce farmer returns and lessen competition in the domestic dairy market. The purpose of the DIRA was to mitigate these risks by ensuring:

contestability for the supply of milk from dairy farmers , and

competition in the wholesale supply of domestic consumer milk products.

Seventeen years on, the DIRA is coming under review.

Published yesterday by the Ministry for Primary Industries, the "Terms of reference for the review of the Dairy Industry Restructuring Act 2001 and its impact on the dairy industry" has outlined the goals and purposed of this review, which will begin now and continue through to mid-2019.

According to the report, the focus of the review will be:

A)

whether the DIRA regulatory regime is operating in a way that protects the long term interests of New Zealand dairy farmers, consumers and the nation’s overall economic, environmental and social well being

B)

Whether, and if so the extent to which, the DIRA regulatory regime gives rise to any unintended consequences manifesting themselves in other parts of the wider regulatory system

C)

Whether the purpose and form of the DIRA regulatory regime remain fit-for-purpose, given the dairy industry’s current structure, conduct and performance, as well as the global and domestic challenges and opportunities facing the industry, the wider regulatory system within which it operates, and the Government’s broader policy objectives.

The review will be led by the MPI in close collaboration with the Ministry for Business, Innovation and Employment, the Treasury, the Ministry for the Environment and the Ministry of Foreign Affairs and Trade.

It will be carried out in a three-stage process in which issues and options for change will be identified, a report to the Government containing the findings of the review will be presented, and finally an implementation of the review's findings will result in a planned legislative change process in the latter half of next year.

Support for the process has been relatively unanimous, with agriculture minister Damian O'Connor saying it will "help the dairy sector get in shape for the future", and Fonterra saying a review of the industry is "well overdue".

Given the recent developments regarding government initiatives to address the environmental impacts of farming, it appears considerable changes may be on the horizon for a number of New Zealand's major industries.

- All information sourced from the Ministry for Primary Industries website, www.mpi.govt.nz